TOREX SEMICONDUCTOR LTD. Q4 FY2025 earnings call

Overall Market and Performance Context

• Management confirmed that the Japanese and European semiconductor markets remained in a downturn through the full year, but inventory adjustment has progressed significantly, and management expects market recovery to begin in the second half of the current fiscal year (ending March 2026).
• Consolidated results achieved lower revenue but an improved net loss compared to the prior year, but missed the full year net profit target due to impairment charges on the Kagoshima fab cleanroom investment.

Strategic and Operational Initiatives

• Core product expansion (Torex): Launched multiple new high value-added products:
  • 36V step-down DC/DC converter XC9704/XC9705 series for industrial equipment, already in mass production with strong customer traction, expected to contribute revenue from H2 FY26.
  • New XCL series high voltage coil-integrated DC/DC converters, achieving industry-leading small form factor and high efficiency via unique packaging design, suitable for broad applications.
  • Mass-produced voltage detectors for CV-charge lithium secondary batteries, already adopted as reference products by major battery manufacturers, targeting growth in small IoT and consumer electronics applications.
• Foundry development (Fenitec):
  • Secured growing new foundry orders from Greater China clients pursuing China+One supply chain diversification, with small signal discrete device orders seeing particularly large scale.
  • Advanced development milestones: completed development of 650V 40A field-stop IGBT (target mass production September 2025), completed development of 650V/1200V SiC SBD (target mass production June 2025), and 1200V SiC MOSFET is in customer evaluation (target mass production FY26).
  • Completed world-first trial production of SiC integrated circuits at the Kagoshima 6-inch fab in partnership with Hiroshima University, demonstrating operation at 500°C with 1000x the radiation resistance of silicon ICs, targeting development for extreme environment applications (decommissioning, aerospace, nuclear fusion, particle therapy).
• Strategic Partnership for Packaging: Entered into a basic agreement to sell all or part of its stake in packaging subsidiary Torex Vietnam to PANJIT. This will allow Torex to focus management resources on wafer design and core analog semiconductor manufacturing, while leveraging PANJIT's packaging expertise to improve overall competitiveness.
• Sustainability: Formalized a sustainability basic policy and identified key materiality issues, integrating sustainability into core management strategy.
• Prime Market Listing Compliance: As of March 2025, the company does not meet the Prime Market listing requirement for tradable market capitalization (current 8.12 billion yen vs 10 billion yen requirement). The company is targeting compliance by March 2026 via improving profitability to raise share price and market capitalization, and will disclose a new mid-term management plan starting FY27 with clearer growth and sustainability disclosures.

For the 2025 March full year (ending March 2025):

1. Torex Semiconductor (design segment): Revenue of 9.871 billion yen, a 1.4% decrease year-over-year (YoY). Operating result improved 2.317 billion yen YoY to a 5 million yen operating loss, driven by a partial reversal of prior period inventory valuation losses. By application: automotive revenue grew on recovery of Chinese infotainment aftermarket business, while industrial and general consumer electronics declined. By region: Japan and Europe remained weak, while Asia (led by recovering China) and North America (driven by strong smart meter demand) saw recovery growth. Torex revenue contributes 41.2% of total consolidated revenue.

2. Fenitec Semiconductor (foundry segment): Revenue of 14.086 billion yen, a 10.5% decrease YoY. Operating result was a 627 million yen operating loss, driven by large revenue declines. By application: all segments saw declines, with industrial devices seeing the largest drop. By region: all regions except Asia declined, with a particularly large drop in North America driven by weak power semiconductor demand. Fenitec revenue contributes 58.8% of total consolidated revenue.

Consolidated totals: Total revenue 23.957 billion yen (-7% YoY); operating loss 632 million yen (improved 1.146 billion yen YoY); ordinary loss 820 million yen (improved 1.632 billion yen YoY); net loss attributable to parent shareholders 2.358 billion yen (improved 1.939 billion yen YoY).

• For the fiscal year ending March 2026 (FY26), management forecasts: total consolidated revenue of 25.5 billion yen, a 6.4% increase YoY; operating profit of 400 million yen, a 1.032 billion yen improvement YoY; ordinary profit of 400 million yen; net profit attributable to parent shareholders of 300 million yen, a 2.658 billion yen improvement YoY.
• Management assumes an average foreign exchange rate of 145 yen to the US dollar for FY26. It forecasts depreciation expense of 2.0 billion yen (-19% YoY) and capital expenditure of 2.74 billion yen (-7.1% YoY).
• Management expects the semiconductor market to hit a bottom in the first half of FY26 and recover through the second half of the year, with Torex having already hit its bottom in Q2 FY25 and Fenitec hitting its bottom in Q4 FY25.
• The company maintains its existing dividend policy, targeting a consolidated payout ratio of 20%+ and a DOE of 3% over the medium term. For FY26, it forecasts a payout ratio of 200.9% and a DOE of 3.6%, and will maintain stable dividends despite two consecutive years of net losses, prioritizing long-term shareholder returns.
• Key growth strategies to achieve FY26 targets include: expanding sales of high value-added products, accelerating new customer development via a strengthened FAE technical sales team, focusing growth on the expanding secondary battery application segment, and leveraging Fenitec's unique compound semiconductor foundry capabilities to capture China+One outsourcing demand.

• The global semiconductor market has experienced extreme demand volatility in recent years; the ongoing market downturn has led to lower-than-forecast revenue and utilization at the new Kagoshima fab cleanroom, resulting in a 1.1 billion yen impairment charge in FY25, marking the second consecutive year of losses from this investment.
• The company currently fails to meet the Tokyo Stock Exchange Prime Market's tradable market capitalization requirement, and faces the risk of delisting from the Prime Market if it cannot achieve compliance by March 2026.
• Despite ongoing inventory adjustment, market recovery in Japan and Europe remains uncertain, and any delayed market recovery could lead to missed FY26 performance targets.
• Advanced product development (including SiC integrated circuits and high-voltage power semiconductors) carries technical risk, with potential delays in mass production or failure to achieve target performance that could impact long-term growth.

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